The North American Auto Show>, which begins next week, was once Detroit's moment in the sun. This year, it s Canada that might be enjoying the afterglow. The nation's auto industry is looking to partner abroad and seek out more foreign investment. If successful, the effort could help lift the broader Canadian economy.
Canada now wields significant influence in the auto industry s turnaround, and it should make U.S. manufacturers nervous. A sputtering Ford (F),
Making cars is even more important to the Canadian economy, says Dennis DesRosiers, founder of DesRosiers Automotive Consultants, a Toronto-area research firm focused on the Canadian auto industry.
Roughly 2.54 million cars and light trucks were made in Ontario, the country s most populous and heavily industrialized province in 2008, according to the Ontario Ministry of Economic Development and Trade. That s more than Michigan's 2.23 million. Before several factories were scheduled to be closed, there were 14 Canadian plants along a 260-mile corridor from Windsor to Oshawa, run by Ford, General Motors, Chrysler, Toyota (TM)
"One in seven jobs in Canada is tied directly or indirectly to the auto industry," DesRosiers says. "In the U.S., it's one in 7.5."
As U.S car manufacturers closed several of their Canadian subsidiaries' plants, that put about a third of that 160,000-person vehicle-making work force on the dole. Now, Canada wants to get back to work, boosting auto production and embracing the future of green auto manufacturing, says Eric Shapiro, a spokesman for the provincial trade ministry.
Thus may begin an interesting chapter in the globalization of the car, which is now made and driven in huge markets that were hardly conducive to four-wheeled personal transport as recently as 10 years ago. China supplanted the United States as the largest car market in the world last year, and India's Tata Motors Chairman Rata Tata said Tuesday that the company plans to sell the Nano, the world's cheapest car, in the U.S. market within three years.
"We also recognize there is a market not only in developing countries, but possibly in the developed countries," Tata said at a press conference at the New Delhi auto show. "For the United States we need a car which has a larger engine, and we need additional crash-test modifications, and we are in the process of doing it."
There's no shortage of skepticism surrounding visions of $5,000, Fisher-Price sized cars zipping along our interstates, but many analysts say these vehicles are coming. Chinese cars will already be on North American highways soon. Zhejiang Geely Holding (GELYF),
Chinese-made or Chinese-assembled cars remain a distinct possibility for the Canadian auto industry. In Ontario, there's plenty of talk about a Chinese car maker setting up shop, even if it's still in the discussion phase.
"There have been trade delegations that have gone back and forth, and it's no secret that Canada wants more Chinese investment," says Ian Bremmer, president of the Eurasia Group, a New York political risk and economic consulting firm. "The Chinese are very interested in getting into this [North American] market."
Bremmer says that a combination of national security concerns and political protectionism in the U.S. quashed a 2005 bid for the oil company Unocal by the China National Offshore Oil Company (CEO),
"It's just less politicized in Canada," Bremmer says, adding that Canada's strong system of confederation gives provinces wider latitude to do their own foreign investment deals.
So will Geely or Chery Automotive, another leading Chinese brand, activate shuttered assembly lines in Canada any time soon? Trade ministry spokesman Shapiro remains discreet. "These discussions are confidential in nature and our government does not discuss this publicly," he says.
Ken Elias, a partner at Maryann Keller and Associates, an automotive industry consulting firm in Stamford, Conn., and Scottsdale, Ariz.., says the Chinese auto specter has loomed over North America for at least seven years, with little substance behind it. In addition to much stricter safety standards that would drive up the price of low-cost cars, he thinks there's a bogeyman element to the chatter.
Cheaply made Chinese cars won't meet domestic safety standards, he says.
"They won't give a top safety rating to any vehicle that doens't have electronic stability controls, and you don't have those in $5,000 cars," he says.
"The whole Chinese thing is hyped to the nth degree," he says. "I believe the whole China story is trumped up by the domestic industry to create trade barriers or help subsidize existing companies to get into these vehicle segments where the Chinese operate. They're saying, 'If we set up this great big threat from China, we could get $20 billion from the government.'"
He adds that Chinese production relies on joint-venture technology that European or North American partners would never allow to be used in competing markets outside China.
"And non-JV technology is so immature it's a decade away," Elias says. "The cost structure alone precludes any possibility of Chinese production here. And as far out in the future as we can see, we are at least five years from Chinese-built vehicles coming to North America."
Morningstar analyst David Whiston says the story makes the rounds but has yet to progress. "The Chinese have been talking about coming over here for years, but it never gets off the ground," he says.
Still, Bremmer says that this year, industry watchers in Detroit should pay close attention to the possibilities this global realignment offers.
"It's nowhere near a done deal, but I think it's just intriguing, he says, adding that [the Canadians] have gotten certainly more than a polite response in terms of [Chinese] interest."